The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Rylito on November 08, 2015, 07:18:18 AM
-
Hi all,
I'm applying for a mid-level management position at a pre-IPO biotech startup. The company is small but profitable and growing rapidly with plans to go public in the next 2 years. My previous jobs have all been either for the government or at established companies that were publicly traded. So I'm curious to know what types of equity plans pre-IPO companies typically offer; I'm trying to figure out how much total compensation I might be able to receive.
Thanks!
-
I would discount any of the equity they offer. At this point, it isn't worth anything. If they "plan" to go public in two years, it won't be worth anything for two years in the best case scenario. Take the job for the other benefits, but my personal opinion is to heavily discount equity against other forms of compensation in both negotiations and in comparisons.
-
There is no typical is such scenarios unless you are a member of the management team (named employee, likely an officer of the company covered for E&O , have an employment agreement defining such terms). Otherwise, the value of all of it is zero and it is a lottery ticket, especially if you are working 'at will' and could be terminated at any time with or without reason. another key information to know is whether they will still raise more rounds of funding as you have to remember about dilution, just because you are given X options and they may worth 'X' , it does not mean at all that they will continue to be worth X - company hits a bump (or board wants different valuation) and they do a round of financing, the value of your "stake" will (typically) plummet
So all in all , focus on tangibles - salary, team you will be working with, type of work you think you would be doing. anything not contractually bounded from them, does not exist. if they want to issue you some funny money lottery tickets , ok - say 'thank you'. other than that, I would not trade tangible for tickets they can change terms on at any time..
-
Thank you for the advice, guys. I hadn't thought about their seeking additional rounds of funding and that is something I will definitely ask about if I interview with them. And your replies are a good reminder not to count my chickens before they hatch :)
-
I would not worry much about their responses - unless you are talking to CEO or very senior managers, the people would not be able to tell you much about rounds of funding, much less promise anything there... and if you are talking to CEO is he/she willing to open the books for you to see the money on hand, cash burn, etc. otherwise, do not worry about it, treat non cash comp as non-existent, and do not take the job is you want to be rich because it is startup is some unproven field. if you take it, take it for good reasons.
great and fear are two of the basic emotions - do not let yourself to be overwhelmed by greed and act stupid because you are listening to fairy tales. if it is not written down in a contract that you have reasonable belief you can enforce, the rest has the same value as babble of the newborn (sounds are present but no content).